Banking · Fund-Based & Non-Fund-Based Facilities
In corporate banking, fund-based and non-fund-based limits serve different purposes in borrower financing. A bank guarantee is categorized as a non-fund-based facility because the bank:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1acquires equity in the borrowing company
- 2provides only working capital support without documentation
- 3disburses cash immediately to the borrower at sanction
- 4undertakes a contingent obligation that may crystallize only if the customer defaults on the underlying obligation✓
Correct answer
undertakes a contingent obligation that may crystallize only if the customer defaults on the underlying obligation
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